Category: Wages

Millennials Buried in Student Debt Can’t Buy Homes!

On May 29, 2018

In Housing, Millennials, Student Debt, Wages

Student debt has soared to $1.4 trillion in the last month according to the Federal Reserve. Now millennials are faced with a combination of soaring student debt and high home prices are giving up on owning a home.

Sources: Federal Reserve Bank of New York, US Census Bureau, New York Times – 5/29/18

In 2003, 42 % of people under age 35 owned a home now only 35 % own a home. The dream of owning a home is slipping away as our society allows the rich continue to enjoy huge tax reductions in the most recent tax bill, with continuous lack of state funding for colleges and universities and then a paucity of forgiveness programs for graduates. The lack of household formations, now at a low point since the Great Recession means that durable orders will fall and sure enough durables (ie. appliances, furniture, cars) orders have fallen recently. As millennials and working class are squeezed between stagnant wages and rents, college debt, car loan payments, and credit card payments:

Source: Bloomberg, The Wall Street Journal, The Daily Shot – 5/29/18

Next Steps:

We saw this problem getting worse in our blog last April and suggested several solutions related to student debt forgiveness and interest reduction programs:

“As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans. Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program. Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt. We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service, providing a universal national service option and corporate sponsorship of an internship by the student.”

Our ideas stand today, as they did six weeks ago as Congress, the Elite and Corporate Nation States continue to ignore the fact that we are not doing right by our young people entering the economy and starting their careers.

Supreme Court Hands Corporations Another Win Over Employees

By Patrick Hill

On May 22, 2018

In Arbitration, Corporate Nation State, Employees, Wages

Photo: Central Penn Business Journal

Yesterday, the Supreme Court announced a major decision that further limits employee rights. Newly appointed Supreme Court, Justice Neil M. Gorsch wrote the majority opinion holding that a 1925 Arbitration held over a 1935 National Labor relations law allowing employees to sue their employers. The court held that employees can not bind together in class action law suits where they have common interests in a complaint against a company, they must use arbitration specified in the agreement. Employees are coerced into employee agreements in that they must sign them to take the job, corporations have the power in a job negotiation as they can just go to the Internet and find another 25 or 100 candidates for many jobs. The candidate cannot negotiate clauses in employment contracts with their own attorney because they want the job more than worrying about a contract clause.

Supreme Court Justice Ruth Bader Ginsberg wrote the minority opinion outlining how unjust this decision is, a part of the opinion she read aloud in court:

“The court today holds enforceable these arm-twisted, take-it-or-leave-it contracts — including the provisions requiring employees to litigate wage and hours claims only one-by-one,” she said. “Federal labor law does not countenance such isolation of employees.”

Research supports Justice Ginsberg’s finding, in most cases the employee is more likely to lose a case in arbitration versus court suits and when judgements are won the final awards are much smaller.

Source: The Economic Policy Institute – 10/14/2016

The decision clearly is another win for corporations increasing their power over employees by severely limiting the ability of an employee to equalize the leverage with their employer in bringing a complaint. Corporations can now take on employees one by one where they will not have the attorney fire power that corporations wield.

Next Steps:

Congress needs to pass a law to make clear that the National Labor Relations Act takes precedence over the Arbitration Law which was passed to use arbitration processes for company to company complaints. Then over the years since 1925 corporations have use their lobbying influence and ability to buy control of presidents appointed justices to extend the law to covering consumers in credit agreements and employee contracts. Corporate control of campaign funding with the Citizens United decision, succeeding Super PACs and extreme lobbying spending strengthens the hegemony of corporations over employees. It is obvious that employee power is at an all-time low as we have the lowest unemployment rate in 10 year while wages for the 80 % in income stagnant.

Employers Should Pay Hourly Employees Fairly, Not Chip Away at Stagnant Wages

By Patrick Hill

On May 21, 2018

In Automation, Corporate Nation State, Wages, Worker Wages

Photo: smallbusiness.chron.com

As more corporations use software to track hourly employee hours some have tipped the data collection rules in their favor. American Airlines is facing a suit from 400 employees for shorting their hours, Kroger and Montage are facing similar suits. We realize that corporations are under great pressure to cut costs on labor to increase profits and meet shareholder and Wall Street expectations. However, since the wages of production employees and non-supervisors have been essentially stagnant for the past 5 years we ask: who is really getting hurt? Corporations have all time low taxes, all time high stock buy backs to juice executive salaries, and all time cash nearly $1 trillion stashed in most offshore accounts.

Meantime employees are at the lowest point of wage power in the workplace in decades with reduced health benefits at greater cost, competition for their jobs from other workers on the Internet, automation, corporate mergers reducing the number of jobs available, and union busting laws. So who are the wage scales tipped toward? Corporations. Average hour worker income has continued to fall when inflation is included.

Sources: Bureau of Labor Statistics, Real Investment Advice – 5/15/18

So, when companies use software to track employee hours, then ‘round hours up’ for breaks or deduct breaks that didn’t happen – like for nurses in healthcare at the University of Missouri Health Care using time tracking software where they cared for patients during their breaks but the software recorded a break anyway. The nurses are losing money, and even more than just wages respect for the work they do.

Next Steps:

Employers wake up! Work is a social contract that is two-way and should be equitable, time cards should be signed by employees in some manner before wages are dispersed. The signing which used to be performed is a confirmation that the employee and employer understand the work being performed and the fair hours completed. Software should not just automatically capture data and cut checks. When time cards were used, filled out by employees – now done online, yet most systems allowed for electronic signatures. In haste, these companies are just using the software to capture the hours, record the hours and post checks. Company IT departments set the rules of the software sometimes in favor the company not the employee. These rules changes can be for just minutes or more but at infrequent times so it is hard for employees to discern what is happening to their paycheck. Time tracking software should be required to show an audit trail for the employee to see to ensure that it is a just capture of their hours. Let’s be clear when these systems don’t treat employees fairly, and allow for confirmation of hours worked the employer is committing a real in justice to the employee. Corporations need to review the process of their time recording software for hour employees, ensure adequate safeguards are in place for employee input and install these systems with employee support.

US Washer Manufacturers Raise Prices Due To Tariffs

By Patrick Hill

On May 9, 2018

In Consumer Squeeze, Low Income Finance, Trade, Wages

Photo: consumerreports.org

As we predicted one result of import taxes (blog of January 24) the Administration placed on imported washers was that domestic suppliers would raise prices. Sure enough they have raised prices by 7 – 15 % at a time when consumers are squeezed. As tariffs were placed on imports we forecasted that domestic manufacturers would take advantage of the higher competition prices and raise their prices as Maytag and Whirlpool have done. Their spokesman say they had to raise prices due to increasing costs of steel and aluminum yet they have raised prices before the steel tariffs went into effect. Once again corporations lobbied government to change the rules in their favor to make more profits while consumers lose.

Other manufacturers for processed goods, food and items with a high shipping cost are raising prices as well.

Sources: Labor Department, The Wall Street Journal – 5/9/18

Of major concern is a combination of higher interest rates, tariffs and competition will cause increases in producer prices that companies will not be able to pass along to consumers. Consumers are too indebted to accept the price increases. Margins are squeezed, companies lose sales, and a recession begins. Possibly the wealthy can continue to purchase major appliances and processed items but the middle class will not.

Next Steps –

The middle class is caught in the cross fire of competing interests in our economy where the Federal Reserve did keep interest rates artificially low increasing the value of financial assets like stocks, homes and consumers were able take on too much debt. The real assistance would be for the federal government to invest in jobs training, career development, Heartland regional economies, African American and Hispanic community development, welcome immigrants, and end stock buybacks. Corporations could allocate the $1 trillion in cash they are holding in accounts mostly overseas and invest in their employees – raising their wages, productivity research, decent family leave programs and giving them more voice in corporate decision making.

Consumers Squeezed Between Debt and Stagnant Wages

By Patrick Hill

On May 8, 2018

In Consumer Squeeze, Debt, Employees, Executive Compensation, Low Income Finance, Student Debt, Wages

Image: americanprogress.org

The Federal Reserve just reported that consumer debt related to auto and student loans are at the highest level they have ever been since 1970 (2^nd chart). As we have noted wages have stagnated since the Great Recession with 90 % of the income gains going to the top 10 % in income. The middle class has been left out of the mainstream of the economic recovery over the past 10 years.

Sources: The Federal Reserve Bank – St. Louis, The Wall Street Journal, The Daily Shot – 5/8/18

While revolving debt from credit cards has fallen (top chart) since the recession, non revolving debt for autos and student loans has soared. Consumers are caught in a squeeze between debt and flat wages. The Commerce Department reported on 1^st Quarter GDP noted that consumer spending had decelerated during the quarter. Sentiment surveys have also shown a reduction in buying plans due to trade issues and any benefit from the tax cuts being lost due to rising prices from tariffs. Banks have posted 7 straight months of an increasing percentage of charge offs on bad loans where consumers are not making payments on non-mortgage debt.

As interest rates go up, payments grow larger per month, with the added tightening of increased prices. The middle class is caught trying to maintain their standard of living by borrowing money to mitigate flat wages.

Next Steps –

There are two sides to the squeeze – increasing wages and reducing loan payment size and principal.

We have endorsed Sen. Cory Booker’s bill called the Worker Dividend Act to share billions of dollars in stock buyback dollars 50/50 with employees. We see a need for incentives for employers to share management extreme wealth now at 300 times average worker salary with the line staff. Or if they can’t do it with incentives we like the City of Portland’s plan to require corporations share their funding above the 150 times level with employees. In our blog about why Wages Are Stuck we outline a series of steps including: placing workers on Boards, ending outsourcing overseas, end H1-B low wage visas, allow repatriated funds be brought back to the US only for wages, productivity or training investments, end stock buybacks and raise employee wages with the funds, breakup anti-competitive oligarchies of huge corporations to create more competition and jobs, balance the recruiting and hiring process for candidates, and offer incentives for employee training and development.

On the loan side, we recommend that student loan rates be brought back to reasonably fair rates as a percentage of the Fed Funds rate, and offer a series of forgiveness programs for universal service, community teaching and caregiving. For auto loans, we request that the Consumer Finance Protection Bureau evaluate major bank auto loans to ensure they are fair and do not have hidden fees or unusual interest rate riders.